Week 8 Flashcards
(18 cards)
what is game theory
method of studying strategic situations
what are non-strategic situations
- perfect comp: firms re price takers and dont have to worry about price of competitros
- monopoly: no competitors to worry about
describe simultaneous played games (normal/strategic form)
- games played where players have to chose their decisions simultaneously
- player choose a decision without knowing what others are doing
describe sequentially played games (extensive form)
- moves are made one after another
- players can see clearly what move have been taken so far before they make their own choice
draw a normal form game example
week 8 slide 16
what is the prisoners dilemna
when 2 people are in a situation, do they chose to cooperate to be collectively better off or betray to be collectively worse off or in between
describe how to solve a game
- must have the following qualities:
- stable outcome, nobody has any incentive to move from an outcome
- the outcome was reached through rational thinking, players assumed to think in a logical way to max expected payoff
what is the nash equilibrium
the best response, best outcome for the game
what is iterated dominance
some games exist where actions can be sequentially deleted because they are illogical to play if our agent is irrational
what does iterated mean
things happen in iterations, step-by-step
describe dominance
comes from the idea that the reason we can delete actions are because there exists another action for the player that is always better
describe battles of the sexes
where games have more than one nash equilibrium
describe matching pennies
games with no pure strategy nash equilibrium
what are one shot games
interaction happens just once
what are repeated games
interaction happens multiple times or periodically
- 2 types: finitely, infinitely
- finitely, repeated finite no of times
- infinitely, repeated infinitely no of times
what are the 2 strategies for infinitely repeated games
- grim trigger: i will first cooperate, but as soon as you defect, I will defect for the remainder of the iterated game
- tit for tat: i will first cooperate, then subsequently replicate your previous action ie if previously cooperative then i am cooperative
describe extensive form game
week 8 slide 60
describe behavioural games
people are not always self-interested and make decisions based on their social preferences
- inequality aversion
- kindness reciprocity
- guilt aversion
